Why India is taking to semiconductors big-time

Chips, wafers, fabs. These terms are being thrown around in geopolitics, tech, policy and government circles for the last few years. They are part of the language of semiconductors, little bits of plastic and metal circuits that now make the world go around. Everything we use which has some electrical or electronic input has a semiconductor or ‘chip’ in it. The cellphone or computer you are reading this on, the internet router and service that you use to get online, the car you’ll drive or the metro you’ll take to get to work and home, the banking services you will use on the ATM, the TV you’ll watch, the microwave that’ll heat your food, the air conditioner that’ll cool your bedroom – virtually anything and everything you use through the day will have a chip in it or be made with the help of semiconductors. 

It’s an industry worth hundreds of billions of dollars. The thing is that so far, the semiconductor industry has been a virtual monopoly of sorts, with countries like South Korea, Taiwan, Japan, China and the US. This means that countries like India, despite having a very strong position in producing computer software and solutions, do not have much of a say in this line of manufacturing. And when supply chains get disrupted, like they did during the Covid pandemic, everything goes into short supply. 

India has now got its act together, building on its strength in computing and technology. The prime minister was in Singapore last week, where he closed an agreement with the city-state for investments and manufacturing of semiconductors, which will greatly help India’s ambition to be a global node for chip manufacturing. India has already put in place incentives for chip manufacturers along with the offer of land for fabrication units and a large, available workforce, both of which are critical parts of the process.

Companies jump on the semiconductor bandwagon

Indian corporates have also got into the act. Adani Group and Tower Semiconductors of Israel have sent their $10 billion proposal to the Union government for approval. Maharashtra has already signed up the land for this proposed project. The Tatas have inked a pact with Singapore’s ASMPT for chip assembly in Assam with a spend of Rs 27,000 crore and a smaller unit in Karnataka. The Tatas are setting up two other big chip fabrication units in Gujarat and Assam and are planning to spend more than Rs 1 lakh crore in the sector. 

The most recent and significant development has been the US government’s decision to collaborate with India and “explore ways to grow and diversify” the global semiconductor supply chain. The importance of this collaboration cannot be understated: the reason for diversification is to get China’s attempt at runaway dominance in manufacturing, especially chip manufacturing, under pressure with less dependence. Both India and the US have been in a geopolitical tangle with China for several years, and India has faced not just the military but also the economic brunt of it, given its geographical location. While the investment from the US will not be very large, the significance of the collaboration lies in the fact that now New Delhi and Washington have moved ahead in their strategic alliance, especially in the technology sector. 

With the government’s Indian Semiconductor Mission (ISM) set up in 2023 as an independent business division, the focus to make India a hub of high-tech chip manufacturing is laser sharp. This will not only strengthen the country’s economy with investments and jobs, it will also create an alternate power centre in global politics and strategy in India.